Boston, MA 10/28/2013 (wallstreetpr) – Shareholders of American retail and departmental store chain J.C. Penney Company, Inc. (NYSE:JCP) are plagued with worries of an impending credit default, despite rising sales reported recently by the company. J.C. Penney’s (JCP) now five-year old credit default swaps (CDS) indicating the cost of insurance stakeholders pay to protect themselves in the event of a default, have spiked beyond 3%, implying that investors suspect a higher risk of default. Analysts now expect JCP to burn around $2.8 billion in cash this year, $1 billion higher than its earlier May estimate.
The retailer’s recent reports of strengthening online sales by 25.3% last month compared with a year ago, coming after a 10.8% gain in August, come as a respite. For the third quarter-to-date, online sales are up 18.6% and the chain expects to see better sales for the rest of the year. America’s oldest department store chain and a reputed national retailer, JCP has been in troubled waters for many years with declining sales revenues and earnings. Higher costs and sinking sales revenue during former CEO Ron Johnson’s tenure led to further losses and fast-eroding cash reserves. Since replacing Johnson as CEO in April 2013, Mike Ullman has seen some success in reviving sales, though the retailer’s woes seem far from over.
The century-old American retailer is desperate to increase sales after revenue collapsed and costs mounted enormously during Johnson’s short-lived 17-month tenure. His strategies alienated the retail chain’s vintage customers and eventually JCP’s board too due to heavy spending on remodeling JCP outlets. To add to its woes, shares have nosedived by over 67% overall this year. Meanwhile, still reeling under long-time competitor Macy’s lawsuit last year citing infringement of exclusive rights, JCP amended its partnership with Martha Stewart Living Omnimedia Inc. (NYSE:MSO) which is now slated to end June 2017 instead of 2021. JCP will also return the 11 million Martha Stewart Living shares it bought for $3.50 each and the right to its board representation.
J.C. Penney’s shares were trading at $6.79 on NYSE at the close of October 25. After-hours trading on the same day saw a minor drop to $6.78.
